MILLIONS of workers who have spent decades building up their pension pots could be hit by a mammoth 55 per cent stealth tax, experts warned yesterday.

Analysts say proposals in Chancellor George Osborne’s Budget will hit not just the rich, but also those on more modest incomes.

Mr Osborne claimed a move to lower the “lifetime allowance” – the maximum that can be saved into a pension pot before a 55 per cent penal tax kicks in – from £1.25million to £1million, would affect “fewer than four per cent” of people. But experts argue that the allowance has now almost halved from £1.8million since 2010 and the tax will hit older savers who have built up their pension pots over many years.

Greg Kingston, of Suffolk Life, part of Legal & General, said: “Even a 21-year-old on the forthcoming higher minimum wage of £6.70 per hour who works a 35-hour week and puts 20 per cent of their earnings into a pension, by the time they are 67, could easily have reached this limit.”

This is punishment for good pension investments performance. Surely you aim to make them grow strongly over the long-term

Dr Ros Altmann, pensions expert

Brian Henderson, of pension consultants Mercer, said: “£1million seems a huge amount. But it will buy an annual pension of about £25,000 on current annuity rates.”

Pensions expert Dr Ros Altmann said: “This is punishment for good pension investments performance. Surely you aim to make them grow strongly over the long-term.”

On April 6 new rules mean people aged 55 and over can use their pension pot like a bank account. But the pensions industry fears fi rms will not be ready in time and the Government has been accused of pushing through changes so people feel they have more money in time for the election